Stimulus: $8 Weekly in Each Paycheck

The Wall Street Journal has polled some leading economists on how the tax breaks included in the stimulus would be best put to use. The latest calculations of the tax break suggest that the $116 billion in tax credits would amount to an extra $8 weekly in each paycheck. The responses range from serious attempts to quantify where the money would have the most beneficial effect to tongue in cheek humor. The responses were just so entertaining that we wanted to select some of our favorites for our readers. See the full blog here.

Tyler Cowen, George Mason University:

In my view, fixing the banking sector is more important than getting the stimulus right. So if you can afford to lose the money, go to a large bank (more likely to be insolvent), find their most overpriced service, and buy as much of it as you can. That way you are doing your part to recapitalize our banking system.

If you’re stuck for ideas, just keep on using ATM machines, owned by other banks, so you can pay large fees to take out small sums of money from your checking account. When you need to, take all of your withdrawals and deposit them back in the account once again and start all over with the process.

Ethan Harris, Barclays Capital:

Get a haircut. It is a purely domestically produced service with extremely high labor content. This means no drain in spending power out of the country: it is “Buy American” without violating any trade agreements. It also has a high impact on employment due to the high labor content. Finally, an $8 haircut–as opposed to the $100 variety– is probably being done by a low income person who is likely to spend rather than save the 8 bucks, ensuring strong second round spending effects. We will groom our way to recovery…

Paul Kasriel, Northern Trust:

I would use the extra cash to start a hedge fund, which would purchase newly-issued asset-backed securities. I would finance my position through the Fed’s TALF program.

Greg Mankiw, Harvard:

How about buying a good economics textbook? (Eds. note: Might the authors of this textbook have a higher propensity to spend their royalties, making it a more stimulative purchase, than the author of this one?)

As funny as the economists were, here are some of the choicest comments. Clearly, this stimulus has a lot of people riled up!

Comment by Kafka:

“Insanity, I am so happy Uncle Sam will be confiscating $8 less of income from commoners per week, at least BO must have a good sense of humor.”

Comment by Thanks, but No Thanks:

“Since the 8 dollars is borrowed, we will be paying interest on it forever. BO just keep the 8 dollars. Don’t force me to borrow money.”

Comment by Sad:

“Wisconsin is proposing to increase its state income tax level (to cover a deficit – foretelling for America as a whole…), so I doubt I’ll ever even see that $8.”

Comment by Susan Stromvall:

“Dear Mr Mankiw,
I will be delighted to purchase one of your textbooks for $8. Please post your address so I can order it right away!”

Comment by As Marie Antoinette said:

“Let them eat $8 cake. The bills will be paid by the grandchildren and who cares about them if we can eat cake now?”

Comment by MichaelJ007:

“Take the $8 cash and BURN IT to stave off the oncoming waves of inflation we are about to see.”


About Ockham Research 645 Articles

Ockham Research is an independent equity research provider based in Atlanta, Georgia. Security analysis at Ockham Research is based upon the principle known as Ockham's Razor, named for the 14th- century Franciscan friar, William of Ockham. The principle states that a useful theory should utilize as few elements as possible, because efficiency is valuable. In this spirit, our goal is to make the investing environment as simple and understandable as possible, yet no simpler than is necessary.

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